Act No. 253/2008 Coll., on Certain Measures Against the Legalisation of Proceeds of Crime and the Financing of Terrorism (hereinafter referred to as the “AML Act”) expressly provides, as of 1 May 2024, that an obliged person also includes a trader in precious metals or precious stones in transactions valued at EUR 10,000 or more. This regulation therefore also applies to online traders who offer such goods. A list of specific metals and stones that are considered precious is set out in Annex No. 1 to the AML Act (e.g. gold, silver, platinum, or diamonds, rubies, emeralds). However, an obliged person may also be a trader who trades in goods made from the above-mentioned materials (e.g. luxury watches, etc.), provided that the value of the precious metal or stone contained in the relevant goods reaches the above-mentioned limit.

In the case of a trader in precious metals or precious stones, a regulated transaction will occur both in the case of the sale of goods to customers and in the case of the purchase of goods or materials from suppliers. Particularly in the case of the purchase of goods or materials from suppliers, it can therefore be expected that the above-mentioned statutory limit for the value of the transaction will be exceeded. In this context, it is further necessary to recall that, in accordance with the provision of Section 54(4) of the AML Act, where a transaction is divided into several separate performances that are related to each other, the value of the transaction is the sum of these performances. Therefore, exceeding the above-mentioned limit cannot be circumvented, for example, by purposefully dividing related transactions into several separate partial transactions (orders).

The AML Act imposes a number of obligations on obliged persons. Basic obligations include carrying out client identification (of the other party to the transaction) and client due diligence. Client identification means ascertaining and verifying the identification data of the client and, where applicable, also of the person acting on behalf of the client (e.g. an authorised representative or statutory body in the case where the client is a legal person). Client identification must be carried out at the latest before the transaction is executed (i.e. before the purchase or sale of precious metals or precious stones), primarily in the physical presence of the person being identified. In addition to identification in the physical presence of the person being identified, the AML Act also permits certain other methods of identification, including so-called remote identification, which may be carried out online. However, these alternative methods of identification may only be used where there is no increased risk of legalisation of proceeds of crime or financing of terrorism in the given transaction. In assessing this question, the assessment is based primarily on the system of internal principles and on the risk assessment that obliged persons should have prepared.

Client due diligence includes obtaining and evaluating information on the purpose and intended nature of the transaction or business relationship, ascertaining the identity of the beneficial owner and adopting measures to verify his identity from reliable sources, ascertaining the ownership and management structure of the client, ongoing monitoring of the business relationship including reviewing transactions carried out during the given relationship, reviewing the sources of funds or other property to which the transaction or business relationship relates, etc. Client due diligence must, in cases prescribed by law, be carried out at the latest before the transaction is executed.

Other obligations include, for example, the obligation to retain data obtained in the performance of obligations under the AML Act, the obligation to report suspicious transactions to the Financial Analytical Office (Finanční analytický úřad), the obligation to prepare a so-called risk assessment and a system of internal principles in the area of mitigation and effective management of risks of legalisation of proceeds of crime and financing of terrorism, etc.

In the event of a breach of obligations in the field of the AML Act, the Financial Analytical Office may impose a fine on the obliged person of up to CZK 10,000,000, and in particularly serious cases the amount of the fine may be up to twice the unlawfully obtained benefit or up to CZK 30,000,000.

In view of the above, it can be recommended that traders in precious metals or precious stones who may be subject to obligations under the AML Act introduce and apply internal regulations and rules in the area of AML so that they are able to fulfil their statutory obligations.

Mgr. David Svoboda and Mgr. Adéla Tůmová

This text was originally prepared by the law firm Mašek, Kočí, Aujezdský in cooperation with the Association for Electronic Commerce (APEK) as legal circular No. 05/2024 intended for members of this association.

This text was translated from Czech to English using an AI translator.